It is a common practice for retail sellers to discount the prices of products in order to attract customers and increase sales volume. One very widespread method of discounting involves issuance of coupons. One type of coupon may be presented by the buyer when a particular product is purchased, in order to obtain a reduced price for the product. Another type of coupon may be presented to obtain X dollars off or X percent off a total purchase of Y dollars.
It is also common to extend discounts of the latter kind without issuing or requiring presentation of a coupon. For example, retailers frequently advertise special sales of X percent off all purchases made on a given day or all purchases made on that day of over a given amount.
Another well-known promotional approach invites the customer to “buy one, and get one free”. Alternatively and as an inducement to purchase larger quantities of products, discount prices are offered for the purchase of increased quantities of products (commonly referred to as “bulk discounts”), as in “one for 50¢, three for $1”.
Other discount plans are available only to customers who are “members” of the plan. These include membership club “superstores” that offer discounted prices on all products sold but are not open to the general public. Other stores (particularly supermarkets) are open to all but issue preferred customer cards that entitle the holder to discounts on some or all products in the store.
Most, if not all, of these discounting approaches have some disadvantages. For example, coupons or other promotions which apply only to a certain product or products will do little to attract customers who are not interested in purchasing those products. On the other hand, across-the-board discount offers may be disadvantageous to the retailer, since some customers may concentrate their purchases on products which carry a low profit margin. When this occurs, the retailer may find that additional revenues generated by the promotion do not translate into much, if any, additional profit. One way in which retailers have attempted to deal with this problem is by excluding low-margin products from sales of the “take 10% off everything” type.
In a somewhat similar known approach, it is known in the supermarket environment to grant a discount of 10% off a group of products if the total purchase amount spent by a customer on a visit to the store is at least $20. If the total purchase amount is at least $50, then a 20% discount is applied to products purchased from the qualified group of products.
None of the known discounting and promotional techniques has fully addressed the need to balance the attractive features of discounting with preservation of profit margins on the products to be sold.